Menu

Pound falls as chances of No Deal Brexit increase

Good morning. The Pound has fallen this week, as markets reacted to increased chances of a No Deal Brexit. Last week, after the Bank of England interest rate decision, governor Mark Carney gave warnings of the impact of the UK leaving the EU with no deal. Over the weekend, the Trade Secretary Liam Fox also said that he now believes the likelihood of no deal is now as high as 60/40.

These comments were picked up when markets opened yesterday morning. The Pound fell against all major currencies including the Euro and US Dollar. GBP/EUR has dropped into the €1.11’s. GBP/USD has dropped below $1.30.

Will the Pound go up or down this week?

I think that for the most part, Sterling will be driven by any further comments or developments with Brexit. You can read my views here about how a No Deal Brexit could affect Sterling exchange rates. There’s little in the way of economic data released from the UK for the markets to digest. In fact, the next key release isn’t until Friday morning. We’ll see the latest UK GDP figures, along with Industrial and Manufacturing production data. These are good indicators of how the economy is faring, and could impact the value of Sterling if the actual result differs from the expected.

With an increased risk of no deal with the EU, there is a real chance the Pound could collapse in value. Some forecasts are suggesting GBP/EUR could drop to parity, and GBP/USD to drop to $1.15. There’s still plenty of time for a deal to be made however. It’s in everyone’s interest for this to happen. However, if Barnier sticks to his red lines and continues to be unwilling to make any concessions, then both sides may sleep walk into a situation that would be catastrophic for the economies of the UK and 27 EU member states.

Protecting against Sterling falling in value

The risk of no Brexit deal translates directly to the currency markets. If you need to convert Pounds to another currency, to purchase property abroad for example, then your costs could increase significantly. If GBP/EUR rates did drop to parity in the event of a No Deal, then a €300,000.00 property overseas would increase in value by more than £30k.